"Many of the impacts of Information Technology are straightforward.

But they are not

necessarily obvious, nor are they trivial"
(Jack Nilles, Centre for Future Research)

Information technology (IT) is dramatically changing the business landscape. Although

organization cultures and business strategies shape the use of IT in organizations, more often the
influence is stronger the other way round. IT significantly affects strategic options and creates
opportunities and issues that managers need to address in many aspects of their business. This
page outlines some of the key impacts of technology and the implications for management on:

Business strategy - collapsing time and distance, enabling electronic commerce

Organization Culture - encouraging the free flow of information

Organization Structures - making networking and virtual corporations a reality

Management Processes - providing support for complex decision making processes

Work - dramatically changing the nature of professional, and now managerial work

The workplace - allowing work from home and on the move, as in telework

There is also the outline of an executive presentation, that has been used to increase awareness of
these issues.

The Impacts

Business Strategy
IT creates new opportunities for innovation in products and services. Services which used to be
delivered in person can now be delivered over networks. Among the key levers are:

resequencing: including parallel processing of data-bases

simultaneity: making information instantly available in several systems (e.g via OLE)

time extension: offering 24 hour a day; 365 days a year service

portability: taking service and products closer to the user

reusability: using information captured for one purpose (e.g. transactions), and using for
others (e.g. customer targeting)
Organization Culture
Newer types of IT such as electronic mail and groupware are creating significant changes in the
way that information flows around group ware, and between them and their customers and
suppliers. It can hasten the development of more open and innovative cultures. However, as
experts like Davenport warns, and surveys from companies like Reuters confirm, the notion that
"information is power" still reigns large in many orggroup warelso, our experience shows that
many new systems fail to become accepted by their users, because the systems developers have
not been culturally sensitive to the department or group ware, in which the new systems are to be
used.

Organization Structures
For many years it has been argued that IT will enable larger spans of control and the flattening of
group ware. This has at last happened, but due as much to initiatives like BPR (business process
reengineering) and the drive to cut costs. Research on whether IT encourages cencentralization
decdecentralizations produced ambivalent results. Many companies have cencentralizedckroom
operations (for efficiency) while at the same time decdecentralizingher activities. It now seems
clear that IT enables a greater variety of structures. In particular it enables more flexible and
fluid structures - networked structures, dispersed team and teams that come and go as needs
change (as in the virtual corporation).

Management Processes
IT is rapidly entering the era where it supports unstructured management processes as well as
highly routinized business processes (see I3 UPDATE No. 4). It provides more effective ways of
accessing information from multiple sources, including use of external information on databases
and the Internet. However, group decision support systems that operate in a meeting room
environment can help enhance decision making, but it does need someone who is an expert
facilitator to help the group master the technique of structured discussion.

Work
IT is dramatically changing the nature of professional work. There are few offices where
professional do not make use of personal computers, and in many jobs involving extensive
information and knowledge based work, the use of the computer is often a core activity.
Becoming effective not only requires traditional skills of organizing, thinking, writing etc., but
knowing how best to use the power of IT for researching sources, accessing information,
connecting to experts, communicating ideas and results, and packaging the knowledge (asset) for
reuse. One aspect of this is the need for hybrid managers - people who are competent at both
their discipline and IT.

The Workplace
The way in which IT diminishes the effect of distance means that it creates a variety of options
for reorganizing the workplace. At a basic level, it can provide more flexibility in the office,
allowing desk sharing and a degree of location independence within a building (this will develop
as CTI (Computer Telephony Integration) and wireless PCs become more firmly established. At
another level it permits the dispersion of work teams, thus saving costs of relocation and travel. It
has also created the mobile professional and also allows people to work effectively from home.
See Insight No. 4 - Telework for more discussion of these aspects.
Implications for Management

These IT impacts have implications for managers of all organizational functions, and not just
MIS managers. Among the most important are:

Understanding the Changing Context of IT - as well as the direct impact on their

business managers need to be able to see these developments in the context of the wider
environment in which their business operates. For a long term perspective see IT Futures
Discussion Paper

Keeping abreast of Developments - not about the details of the technologies, but about
the business impacts; for example by meeting suppliers business consultant's, attending
conferences, or receiving customized presentations from independent analysts.

Integrating IT and Business Planning - the IT strategy should support the business
strategy and vice versa. This may need new planning processes, hybrid teams, and a
increased incorporation of the levers into business plans.

Addressing Culture Issues - the dimensions of existing and desired culture need to be
understood and how proposed systems will affect them. In particular attention needs to be
paid to the organization's information culture

Experimenting with new Structures - using IT to remove some of the limitations of

hierarchy and to encourage the development of innovative teams, using experts located in
different functions and places. Managing dispersed teams is challenging but rewarding.

Ensuring that new systems are customized change proof - our studies have shown
many new systems to be developed around existing customized structures and
responsibilities. Since these change very rapidly, new systems should be built with
orgacustomizedxibility and change in mind.

Developing New Skills - more of tomorrow's managers will need to become hybrid
managers, combining the knowledge and skills of general management, their own
discipline and IT.

Using IT as a management tool - initiating personal use of IT into every day work. This
should include use of decision support tools, groupware, knowledge management
solutions and exploiting the Internet.

Exploiting Information as a Strategic Asset - using the techniques of Information

Resources Management to develop it as a valuable resource for internal use, for adding
value to customer activities or services, or for creating saleable products.
 Introducing Knowledge Management and Innovation - going beyond information to
developing networks of knowledge experts who evolve the organization's knowledge
assets to create extra capabilities and value.

Reorganizing the Workplace - by introducing flexible working and telework. The

business benefits of this in terms of productivity and cost savings are such that there are
many personal benefits to be achieved by a successful implementation.

Copyright. David J. Skyrme. 1995. This material may be copied or distributed subject to the
terms of our copyright conditions (no commercial gain; complete page copying etc.)

Update (August 1999)

The continual stream of high profile IT system failures, such as Taurus (Stock Exchange System)
and the London Ambulance Service system in the UK, show that insufficient attention is still
given in many projects to human and organizational factors. Although awareness of these factors
has improved, users are more involved, and new methods such as RAD (Rapid Applications
Development) have helped, too many organizations still fall into the same old habits.

The above Insight is as valid today as when it was written. The developments hinted at in terms
of exploiting information are indeed occurring through Internet Commerce and Knowledge
Markets.

On a point of terminology. Today, rather than the abbreviation IT, the term ICT (Information and
Communications Technology) is more widely used.

The Impact of the Internet on Business

Current Uses of the Internet
The Internet has a wide variety of uses. It provides an excellent means for disseminating
information and communicating with other people in all regions of the world. While the greatest
use of the Internet has been sharing information, other sources of use are rapidly developing. For
instance, chat rooms, a space where people can go to discuss an assortment of issues, and
Internet Commerce, which connects buyers and sellers online. The following are other examples
of current Internet uses:

1. Technical Papers

Originally, the Internet was only used by the government and universities. Research scientists
used the Internet to communicate with other scientists at different labs and to access powerful
computer systems at distant computing facilities. Scientists also shared the results of their work
in technical papers stored locally on their computer system in ftp sites. Researchers from other
facilities used the Internet to access the ftp directory and obtain these technical papers. Examples
of research sites are NASA and NASA AMES.

2. Share Company Information

Commercial companies are now using the Web for many purposes. One of the first ways that
commercial companies used the Web was to share information with their employees. Sterling
Software's Web page informs employees about such things as training schedules and C++
Guidelines. There is also some information which is company private and access is restricted to
company employees only. Another company example is Sun Microsystems which similarily
contains general information about the Sun Microsystems company.

3. Product Information

One of the ways businesses share information is to present their product information on a Web
page. Some examples are: Cray Research, Sun Microsystems, Hewlet Packard, and GM's Pontiac
Site. The Web provides an easy and efficient way for companies to distribute product information
to their current and potential customers.

4. Advertising

Along these lines, companies are beginning to actually advertise online. Some examples of
different ways to advertise online are Netscape's Ad Page. Netscape has a list of advertising
companies. They also use a banner for advertisements on their Yahoo Web Page. Starware
similarly uses banner advertisement. These advertisements are created in the established
advertising model where the advertising is positioned between rather than within editorial items.
Another type of advertising focuses on entertaining the customers and keeping them at the
companies' site for a longer time period. Some of the more interesting of these are:

MCI with a soap opera/ detective story.

Ragu Soap Opera, Italian art, prizes, etc.

Stoli Puzzles, submit drink receipes, prizes, etc.

Miller Genuine Draft Discussions on various topics such as music scene in

Austin.

The advantages of each method of advertising will be discussed in more detail in the
section on strategic risks and target markets.

5. Business & Commerce on the Net

Commercial use restrictions of the Internet were lifted in 1991. This has caused an
explosion of commercial use. More information about business on the Internet can be
found at the Commerce Net. This site has information such as the projected growth of
advertising on the Internet and online services. Commercial Services on the Net has a list
of various businesses on the Internet. They are many unusual businesses listed here such
that you begin to wonder if they are legitimate businesses. This topic is discussed in more
detail in the section on risks and consumer confidence. Business and Commerce provides
consumer product information. The Federal Trade Commission is also quite concerned
about legal business on the Internet.

WWW users are clearly upscale, professional, and well educated compared with the
population as a whole. For example, from CommerceNet's Survey (CommerceNet is a
not for-profit 501c(6) mutual benefit corporation which is conducting the first large-scale
market trial of technologies and business processes to support electronic commerce via
the Internet) as of 10/30/95 :

25% of WWW users earn household income of more than $80,000 whereas only
10% of the total US and Canadian population has that level of income.

50% of WWW users consider themselves to be in professional or managerial

occupations. In contrast, 27% of the total US and Canadian population categorize
themselves to have such positions.

64% of WWW users have at least college degrees while the US and Canadian
national level is 29%.

CommerceNet's study also found that there is a sizable base of Internet Users in the US
and Canada. With 24 million Internet users (16 years of age or older) and 18 million
WWW users (16 years of age or older), WWW users are a key target for business
applications. Approximately 2.5 million people have made purchases using the WWW.
The Internet is, however, heavily skewed to males in terms of both usage and users.
Access through work is also an important factor for both the Internet and online services
such as America Online and CompuServe. For an example of the size of the market, the
total Internet usage exceeds online services and is approximately equivalent to playback
of rented videotapes.

6. Magazines

Magazines are starting to realize that they can attract customers online. Examples of
magazines now published online are Outside, Economist, and Business Week. These
magazines are still published in hard copy, but they are now also available online. Many
of these publications are available free sometimes because of the time delay (i.e.
publications online are past issues) or usually to draw in subscribers for a free initial trial
period. Some of these publications may remain free online if advertisers pay for the
publications with their advertisement banners.
7. Newspapers

Some newspapers are beginning to publish online. The San Jose Mercury News is a full
newspaper online, while the Seattle Times offers just classified ads and educational
information. The Dow Jones Wall Street Journal publishes its front page online with
highlighted links from the front page to complete stories. The Journal also provides links
to briefing books, which provide financial information on the company, stock
performance, and recent articles and press releases. For an example of a briefing book
see, Netscape Briefing Book. This is all free by the Wall Street Journal during the trial
period which should last until mid 1996.

8. Employment Ads

Companies are also beginning to list their employment ads online to attract talented
people who they might not have been able to reach by the more tradition method of
advertising in local papers. Sun Microsystems provides a list of job openings on the
Internet. Interested parties can submit a resume or call to schedule an interview, which
saves time for everyone involved. Universities can also help their students find jobs more
easily by using job listings on the Internet. The University of Washington has a job listing
site. Local papers can also make it easier for job searchers by creating a database search
feature. The job searchers can select the type of jobs that they are interested in and the
search will return a list of all the matching job openings. San Jose Mercury News is a
good example of this approach.

9. Stock Quotes

There are several time delayed (15 minutes) ways to track stock performance, and they
are all are free. The first to provide this service was PAWWS Financial Network, and now
CNN also lets you track stocks. These are commercial companies which provide stock
quotes for free but charge for other services. A non-commercial site, MIT's Stock &
Mutual Fund Charts, updates information daily and provides a history file for a select
number of stocks and mutual funds. Information in these history files can be graphically
displayed so that it is easier to see a stock's performance over time.

10. Country Investment Information

Thinking about investing in a particular country? Information on countries can be found

online. For example, check out the graphical information (GDP, inflation, direct foreign
investment, etc.) on Indonesia.

11. Order Pizza

You can order a pizza online. This Web site is actually a joke, but you can easily imagine
people working late at their offices and ordering out for food online.

12. Software Distribution

A very effective and efficient use of the Web is to order software online. This reduces the
packaging and shipping costs. Also documentation can now be provided online. A good
example is Netscape Navigator. Another example is Macromedia's Shockwave. What is
Shockwave for Director? The description online is as following:
"Shockwave for Director is the product name for the Macromedia Director-on-the-
Internet project. Shockwave for Director includes two distinct pieces of functionality:
(1) Shockwave Plug-In for Web browsers like Netscape Navigator 2.0 which allows
movies to be played seamlessly within the same window as the browser page.
(2) Afterburner is a post-processor for Director movie source files. Multimedia
developers use it to prepare content for Internet distribution. Afterburner compresses
movies and makes them ready for uploading to an HTTP server, from which they'll be
accessed by Internet users."

So by reading about the product online, you can decide if it sounds interesting. You can
then immediately get the software by downloading it from Macromedia's computer to
yours. Next, you install it on your system and you're all set. You didn't even have to leave
your terminal, and there was no shipping cost to you or the company.

13. Traffic Information

Ever wonder what the rush hour traffic was like before you head home and get stuck in
it? Many different cities are putting traffic information online. In Seattle, a graphical
traffic report is available.

14. Tourism

Plan a trip to Australia or New Zealand with information gathered off the Internet. These
and other countries are on the Internet. So you can plan your vacation from your
computer.

15. Movie Previews

Who needs Siskel and Ebert, when you can be your own movie critic? Buena Vista
Movie Clips provides movie clips from many of their new releases. For a sample movie
clip preview "Unstrung Heroes".

16. Chat Rooms on AOL

Chat rooms are a more interactive technology. America Online provides areas where
people can "log on" and converse with others with similar interests in real time. This is
the first popular use of interactivity by the general public. The other uses up until recently
have been more static, one-way distribution of information. Interactivity is the future of
the Internet (See the next section).
 Forecast of How the Internet & WWW Might Be Used
in the Future
There are many ways that the Internet could be used in the next 3 to 5 years. The main
aspect that they all have in common is the increased use of interactivity on the Internet.
This means that the Internet will shift from being a one-way distribution of information to
a two-way information stream. Scientists will continue to lead the way in this area by
watching the results from scientific experiments and exchanging ideas through live audio
and video feeds. Due to budget cuts, this collaboration should be expected to increase
even more to stretch what budget they do have. (For more information on this, check out
Business Week article on science and technology "Welcome To The World Wide Lab"
10/30/95.)

1. Interactive Computer Games

One of the first areas where interactivity will increase on the Internet are computer
games. People will no longer have to take turns playing solitary or crowd around one
machine. Instead they will join a computer network game and compete against players
located at distant sites. An example of this is Starwave's Fantasy Sports Game. This game
is still a more traditional approach of updating statistics on the computer and players
looking at their status. A more active game is Marathon Man, which portrays players on
the screen reacting to various situations. In the future, many of these games will also
include virtual reality.

2. Real Estate

Buying a home online will become possible. While very few people would want to buy a
home without seeing it in person, having house listings online will help reduce the time it
takes to purchase a home. People can narrow down which houses that they are actually
interested in viewing by seeing their description and picture online. An example is this
list of house descriptions by region of the country. This will be improved when database
search capabilities are added. People can select the features that they are interested in and
then search the database. In response, they will receive a list of houses that meet their
criteria. Also, having several different images of the House as well as a short video clip of
a walk through of the house, will help buyers make their selection quicker. This area is
growing quickly. For example, the following sites of interest to the West Coast were
added online since the writing of this paper: Windermere Real Estate, Fractals, and
Listinglink.

3. Process Mortgages online

After a house is chosen, potential buyers can apply for a mortgage online. No longer will
buyers be restricted to local lending institutions, since many lenders will be able to
compete online for business. Visit an example of an online mortgage computation. In the
future, each lender will have a Web page which will process the mortgage application.
One of the main reasons this has not been implemented is security, which is discussed
further under the strategic risks and security section.

4. Buying stocks

Stocks will soon be able to be purchased over the Internet without the assistance of a
broker. Charles Schwab has a prototype that is being tested currently in Florida. Once the
security issues are ironed out, this application will also be active.

5. Ordering products.

Ordering products online is an important application. As mentioned above, the Pizza Page
showed how easy it could be done. Other companies are setting up Web pages to actually
do this. An example is TSI Soccer. Customers can actually order online if they choose to
do so. They can even send their credit card number over the network. Since this is non-
secure, most people probably still call the company to order any item.

6. Live Video

Viewing live video clips will become more common in the future. CNN has files of video
clips of news stories at video vault which can be downloaded and viewed on a home
computer. Seeing actual live video feed is dependent on network speed, and most home
users do not have fast enough connections to make this a practical application yet. This is
discussed in more detail under the section strategic risk and speed of network access.
Once the speed of network connection increases, more people will be interested in live
video clips.

7. "Chat" Internet Telephone

While AOL users are currently accessing "Chat Rooms" to communicate with other
people on the Internet, they are restricted to text-based communication or possibly an
icon as their identity online. CUCME from Carneige Mellon provides a means for people
to actually see other people online. However, network speed is once again a limiting
factor. If a user is not directly connected to the Internet (most connections are via
modem), then the image is extremely slow. This application will become more popular
with increased network connections.

8. Video Conferencing

On the other hand, businesses will begin using video to communicate with others.
Andersen Consulting is setting up training online. There should also be some applications
that businesses can choose to help set up video conferencing. IBM bought LOTUS Notes
for this reason last summer. IBM needs to make it a more flexible solution by interacting
LOTUS Notes with the Internet. They currently are in the process of doing this. Netscape
also offers a solution based on the software company Collabora that they purchased last
fall. These possible solutions should encourage businesses to use video conferencing and
online training. Additional information on Video Conferencing is also available.

Strategic Risks Associated with Business Uses of the

Internet
1. Targeting right market segments.

It is important for advertisers to spend their advertisement dollars wisely. They can
achieve this by using appropriate methods of advertising and targeting the right market
segments. Two different types of advertising are entertainment ads and traditional
advertising. Entertainment ads focus on entertaining a customer whereas traditional
advertising is more direct and usually positioned between rather than within editorial
items. When the entertainment ads work well, they can be quite successful in drawing
customers to their site; however, it is very easy for this type of ad to flop resulting in no
one returning to visit the advertisement site after they see it once. Traditional advertising
has better readership. It can also be used well in targeting the right market segments. For
instance, the ESPN Sports page would be a good site to place ads by Gatorade and Nike.
Sports minded people that might be interested in these products would be likely to access
these pages. A good reference for researching this topic further is at Advertising Age.

2. Security

One of the main factors holding back businesses' progress on the Internet, is the issue of
security. Customers do not feel confident sending their credit card numbers over the
Internet. Computer hackers can grab this information off the Internet if it is not
encrypted. Netscape and several other companies are working on encryption methods.
Strong encryption algorithms and public education in the use of the Internet should
increase the number of online transactions. After all, getting your credit card number
stolen in every day transactions is easier. In addition, securing private company
information and enforcing copyright issues still need to be resolved before the business
community really takes advantage of Internet transactions. There are, however, currently
some methods within Netscape for placing the information online yet restricting it to only
certain people such as company employees.

3. Consumer confidence

Consumer confidence is essential for conducting business online. Although related to

security, consumer confidence also deals with feeling confident about doing business
online. For instance, can consumers believe that a company is legitimate if it is on the
Internet, or could it be some kind of boiler room operation? Also, companies must be able
to substantiate their advertising claims if they are published online. These are some of the
issues that concern the Federal Trade Commission, as well as the future of Internet
commerce. After all, if consumer confidence is low, businesses will not succeed.
4. Speed of network access

The speed of network access is a risk for businesses. If businesses spend a lot of money
for fast network connections and design their sites with this in mind yet customers have
lower speed connections, this may result in less consumers accessing their site. Less
consumers accessing their site most likely results in lower profits which is in addition to
the extra cost of the faster network connection. On the other hand, if the company
designed for slower access yet customers have faster access, they could still lose out in
profits. Currently, some of the options that home users have to choose from are traditional
modems, ISDN, and Cable Modems. Traditional modems are cheaper but the current
speed is a maximum of 28.8 Kbps. ISDN is faster at 56 Kbps, but more expensive. Cable
modems are faster yet with a speed of 4 Mbps. However, two-way interaction with a
cable modem needs some more testing to be sure that it works as well as ISDN.

5. Picking Wrong Industry Standards

Along these lines of picking industry standards, companies must also be sure that the
Web Browser that they develop for is the standard. Otherwise, some of the features that
they are using to highlight their site may not work. Currently the defacto standard is
Netscape. There also needs to be a standard language that adds high quality features such
as animation, so that software applications written for the Internet will run on all the
different types of architectures customers may have. Major computer industry players
have backed JAVA by Sun Microsystems. So while some areas are becoming
standardized, companies must be alert to industry changes to avoid becoming obsolete in
hardware, software, and data communications.

6. Internet Community & Philosophy

The Internet was originally developed with a philosophy for sharing information and
assisting others in their research. The original intent emphasised concern for others,
technological advances, and not for profit organizations.

With the lifting of commercial restrictions in 1991, businesses are now joining the
Internet community. As with any small town that has a sudden increase in population, fast
growth can cause problems. Old residents could create animosity if they feel that the new
residents are taking over their community and causing congestion and prices to increase.
Businesses need to be conscious of this phenomenon.

While businesses can expect help from Internet users, businesses will lose this help if
they only use it to make a quick profit. As in a large city, people will start to feel less like
helping others in need. Businesses will be more successful on the Internet if they can
emphasize how they can help add value to the Internet rather than focusing on how to
make a quick profit. For example, businesses can take advantage of the opportunity to
provide additional Internet services (e.g., services discussed in the sections on current
uses of the Internet and future uses) now that funding from the government is being
reduced.
An example of a city that has grown rapidly, yet still considered very livable, is Seattle.
One of the reasons attributed to Seattle's successful growth is, that despite it being a large
city, there are numerous small communities within the city. These small communities
retain such benefits as concern for others within the framework of services that a large
city can provide. If businesses along with the Internet community follow this model, the
Internet will have a chance to keep its successful small town atmosphere while adding
increased services for more people.

Conclusion

The Internet is a dynamic environment. While there are many risks involved with change,
there can be many benefits. This paper has given some ideas on possible benefits and
possible risks. Now it is up to each business to decide if the potential benefits outweigh
the potential risks. Hopefully, we'll see you on the Web!